Public Accounts Committee on Feb. 9th, 2026

[The Chair, Conservative, John Williamson]

Thank you, Mr. Stevenson.

Next is Mr. McKinnon.

You have the floor for five minutes, please.

[Ron McKinnon, Liberal, Coquitlam—Port Coquitlam, BC]

Thank you, Mr. Chair.

I'm interested in the fiscal anchor about operational budgets by 2028-29. This was spoken to by Mr. McCauley and Mr. Osborne.

I believe, Ms. Boudreau, you indicated that we needed some changes to the way accounting is done. I believe Ms. Hogan mentioned that there are certain difficulties with capital expenditures and tracking them properly.

In real life, I'm not an accountant. I'm a computer programmer, so please speak to a computer programmer to tell him the kind of changes we need and how we are going to track our progress towards this fiscal anchor as we go forward.

I'll open that to whoever feels they can answer it.

[Annie Boudreau]

I can start with the accounting changes. I think the answer will be very short and sweet.

There will be no accounting changes. Public accounts will remain based on public sector accounting standards. That will be the way we're going to be reporting on them, the same way we have reported for years and years. That will not change. I think that's exactly what Ms. Hogan said at the beginning. She will be auditing the public sector accounting standards, and that has no bearing on operating versus capital.

Maybe I can turn it over to my colleagues at Finance now.

[Evelyn Dancey]

Thank you.

I'm happy to provide a bit of background, and maybe in plainer language, about the capital budgeting framework the government proceeded with in budget 2025.

As I think has been made quite clear, the government has indicated that it has no intention of changing the basis of its financial reporting, which is the public accounts of Canada and the Department of Finance's monthly fiscal monitor. Those financial statements are prepared on the basis of public sector accounting standards that are set by independent public bodies in our country. The financial statements in the public accounts are audited by an independent Auditor General.

What the government did this fall, culminating in its first presentation in the budget, is.... The Department of Finance assisted the government's development of a capital budgeting framework in which the government is now able to more closely understand the composition of its spending and shift it towards investments intended to help grow the economy. Really, this is more of an economic framework. It's a decision-making framework to support cabinet, the Prime Minister and the Minister of Finance.

It is different from the government's financial statements and its public financial reporting. That's the reason the capital budgeting framework has certain definitional differences. It's because the government is trying to make decisions that have different impacts on the economy. To do that, we have to be able to talk, for example, about transfer payments to other levels of government that are used for infrastructure. Those are investments intended to grow the economy, increase productivity and raise the standard of living of Canadians.

A financial reporting framework doesn't allow the government to really weigh and assess the relative value of those kinds of investments. That's what the capital budgeting framework is for. It's more of an economic and decision-making framework.

[Ron McKinnon, Liberal, Coquitlam—Port Coquitlam, BC]

Are we going to be able to see in the accounts a line item that shows our operational budget, plus or minus whatever?

[Evelyn Dancey]

In the government's budgetary publications—the spring update and budget—we would be producing financial displays focused, as the deputy said, on the government's fiscal anchors, including that intention to ensure that day-to-day operational expenditures are covered by revenues by 2028-29. You will see that type of information in its own discrete tables, not interspersed with the tables that the public is used to seeing on a public accounts or accounting standards basis, so there will be specific tracking.

The baselines were published in budget 2025—the calculation of the operating balance, the baseline of capital investments and the incremental amount of capital investments made in the budget, etc. All of that is available in budget 2025, annex 2 in particular. We would anticipate continuing with those standard displays so we can track our success relative to our mission for the economy, and we track that in the capital budget. We report our financial outcomes on a public accounts basis and, indeed, in the public accounts.

[The Chair, Conservative, John Williamson]

That is your time, Mr. McKinnon. Thank you very much.

We're beginning our third round now.

Mr. McCauley, you have the floor again for five minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Ms. Boudreau, on the issue of the $3 trillion, it says that as of March 1, the exposure is over $3 trillion. Quickly, why is there the jump from $2 trillion to $3 trillion for our exposure?

[Blair Kennedy, Executive Director, Government Accounting Policy and Reporting, Treasury Board Secretariat]

Briefly, I can tell you what's included in the $3 trillion. It's mainly the insurance programs at CDIC, or the Canada Deposit Insurance Corporation, as well as EDC. It accounts for about $2.2 trillion.

When I look at 2025, we have a little over $3 trillion. When I look at 2024, I don't have the calculation of what makes up the amount in front of me, but I can provide that.

[Kelly McCauley, Conservative, Edmonton West, AB]

That's wonderful.

Mr. Leswick, I just want to go back to you, please.

The IMF's article IV consultation for Canada states that “clarifying the role of the debt-to-GDP ratio”—not debt-to-deficit, but debt-to-GDP—“as the primary anchor...would strengthen discipline, transparency, and credibility”.

The government has moved away from debt-to-GDP. The IMF says that we need to return to that as an anchor. Is that something you believe we should do?

[Nick Leswick]

Certainly, I think debt sustainability is of paramount importance, but it's for the government to decide what fiscal anchor will steer its fiscal policy.

[Kelly McCauley, Conservative, Edmonton West, AB]

The government is using a political decision on deficit-to-GDP instead of what's perhaps best for the country, as suggested by the IMF.

The IMF also states that we should provide clarity around the use of the capital versus operating expenses, which the government has not provided. Is that a weakness, perhaps, in our transparency and accountability?

[Nick Leswick]

I take a lot of things the IMF says with a grain of salt.

Debt sustainability is important. The government has every opportunity to select its own fiscal anchors, so I'll leave it at that.

Obviously, we take the article IV advice seriously. I'll stop there.

[Kelly McCauley, Conservative, Edmonton West, AB]

I want to get back to one of the things I bring up every year. I'm sure you're ready for it.

We always hear the government claim that our net debt-to-GDP is the best in the G7. We brought up before with you, several years ago, that it includes the assets from the CPP and the Quebec pension plan. I notice that this year's public accounts—it's the first time I've seen it—state that this should not generally be considered part of this because you can't access them without permission from the provinces.

Do you still think it's valid for the government to include CPP and QPP as part of its net...or its claims of lowest deficit-to-GDP in the G7?

[Nick Leswick]

I do, but only for the basis of international comparisons. That's the kicker, in my view. If you want to compare net debt-to-GDP ratios across advanced economies, it's almost impossible to do without these types of modifications.

For example, many other advanced economies take their social security—

[Kelly McCauley, Conservative, Edmonton West, AB]

No, I understand that.

I'm going to go back to your quote from three years ago, when you said, “Understand that your target of criticism, because you have to ask yourself whether the assets of the CPP...would be available to the government in a time of distress”. Then you quickly stopped yourself and we had kind of a laugh because we understand that the government can't access that. It would be political suicide.

Should they be using these untouchable assets in their PR, basically, and saying they are in great shape? When you take them out and compare us to the OECD, I think we're 22nd best out of 29. Again, it goes back to transparency.

[Nick Leswick]

I take the point and I made the point. I agree that accessing the CPP and QPP accounts in a time of distress would be prohibitive, but for international comparisons, you have to add them back in. Other countries take social security premiums and throw them against general revenues. They just hold the liability in their general accounts.

I support it for international comparability, but I definitely emphasize that I agree with you, from a perspective of—

[Kelly McCauley, Conservative, Edmonton West, AB]

I'll go back to your comment from three years ago, previous to that one, when you said, “I admit that there are a lot of gymnastics here” to justify the government's use of that.

I only have 15 seconds, so I'll just pass that off, until the next time around.

[The Chair, Conservative, John Williamson]

Thank you very much, Mr. McCauley.

Your seconds will add up. You've left some on the table.

Turning now to you, Mr. Al Soud, you have the floor for five minutes, please.

[Fares Al Soud, Liberal, Mississauga Centre, ON]

Thank you, Mr. Chair, and thank you all for having me.

I am, of course, not a usual member of this committee, but it is a privilege to be with all of you and the millions watching us on CPAC right now.

One fact that stands out in the public accounts, year after year, is that roughly 66% of total federal spending flows through statutory transfer payments, largely outside of direct departmental discretion and outside of Parliament's ability to adjust spending line by line through estimates.

Ms. Boudreau, my question is about statutory transfer payments that are made automatically.

What active role do departments play in monitoring performance, compliance and risk once the framework has been authorized by Parliament?

That is a long question, I am sorry.

[Annie Boudreau]

Thank you very much for your question.

I will use the old age security benefits as an example. As I said earlier, the payment of these benefits represents $80 billion.

As you said, this payment is a statutory expense. It is not voted on by Parliament through an appropriation act or the Standing Committee on Government Operations and Estimates, as MP McCauley said earlier.

The payment has been increasing year over year, primarily for two reasons. First, more beneficiaries are eligible. Second, the benefits rise with inflation. If I am not mistaken, those transfer payments are the responsibility of the Department of Finance.

As I just pointed out, there are major reasons for the increase in statutory transfer payments.

[Fares Al Soud, Liberal, Mississauga Centre, ON]

Thank you very much, Ms. Boudreau.

My next question is for Ms. Hogan.

From an internal controls perspective, where does the Auditor General see the greatest risk when spending is statutory and high-volume but not revisited annually through estimates?

[Karen Hogan]

This is where you're relying on IT computer controls to make sure that once something has been entered into the system, it's functioning properly. That's why we raised concerns around access issues linked to IT general computer controls. Many of those statutory payments have a low dollar value and are high-volume.

There are some where there would be a separate transfer payment agreement. Then it is to make sure that when it's first put into the system, it's put in correctly.

I think there are two controls—that initial one and then the ongoing IT computer control. That's where your greatest risk would lie, from an audit perspective.

[Fares Al Soud, Liberal, Mississauga Centre, ON]

My next question is on outsourcing. The Auditor General has raised concerns related to reliance on professional and special services. In particular, you highlight a need for better procurement, governance and justification.

In the cases you've examined, how consistently does the government ensure that knowledge and capability are transferred back to the public service when consultants are used?

[Karen Hogan]

Because you narrowed it to what I've examined, I can't speak generally, but I can speak to some of the issues we've seen, for sure.

We highlighted from some big IT programs we looked at that there wasn't a concerted effort to ensure that the skills the government went out to seek—because they didn't have them internally—got transferred over so that competencies got transferred over. It is something departments should work on.

However, I caution that there's a need not to create more rules when it comes to procurement but to enforce the current rules. That, to me, is a value added. Either you're going out to fill capacity because you need surge capacity, or you have a skill you don't need. Then, in order to not create long-term dependencies, you need to figure out a way to transfer those skills into the public service.